HCLT Whitepaper: Supply Chain as Service

AuthorsSekhar BabuNipun Kohli Sandeep Rameja Gaurav Dixit Nikhar Agarwal

Supply Chain as a Service (SCAS)

JANUARY 2012

Supply Chain as a Service (SCAS) | January 2012

2 © 2012, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

Abstract 3

Purpose 3

Target Audience 4

Introduction 4

Problem Statement 5

Key Industry Trends 7

Solution 9

Unique Business Benefits 10

Conclusion 12

About The Author 13

About HCL 14

TABLE OF CONTENTS



Abstract

Many of the world’s leading Retail and CPG enterprises are facing increasing pressure to improve operational performance, increase productivity and drive innovation in supply chain management by streamlining processes, eliminating errors and reducing costs. The industry is additionally challenged by the power of a demanding consumer and multi-channel fulfillment business model.

HCL SCAS – Supply Chain As a Service, is based on the latest supply chain trends that enable an enterprise with best of breed supply chain solutions to adapt the fluid business environment and ensure compliance with regulatory requirements. HCL SCAS doesn’t require large capital investment and is modeled based on the Pay as Use model.

The HCL proposition, if adapted, shall improve operational efficiency of supply chain and increase productivity by providing real-time information and hence real business benefits. HCL SCAS solution has kept speed, ease-of-use and scalability in mind and enables businesses to provide real-time benefits.

This paper on HCL SCAS will discuss details on how to assist the client organization in overcoming challenges around operational efficiency, cost reduction and enhance customer satisfaction.

Purpose

The purpose of this whitepaper is to enlighten Retail and CPG large and mid-market enterprises on cost effective supply chain solutions that help them to manage day-to-day operations and processes efficiently. The proposed solution also enables an enterprise with the needed insight and intelligence to successfully adapt the fluid business environment and ensure compliance with regulatory requirements.



Target Audience

The intended audience for the paper includes professionals with roles such as:

1. Supply Chain Heads/ Managers

2. Multi-channel/ eCommerce Heads

3. Business and/or Technology Consultants

4. IT professionals with Development and Project Management backgrounds

5. Technical Architects

6. Operations/ Retail & CPG Business Managers

The solution can be offered to companies in the following industries::

1. Retail & CPG

2. Supply Chain, Logistics & Operations

3. Manufacturing

Introduction

Many market enterprises, especially Retail and CPG, are facing challenges in today’s exigent economic environment. It is no longer business as usual as companies struggle on how to optimize for today and get on track to capitalize on new opportunities that will emerge as the economy grows. They need business solutions to help them to manage day-to-day operations more efficiently and also provide them insights to take the business forward.

With increased customer empowerment in Retail and CPG industry, it has become imperative for companies to understand their supply chains better. Over the years supply chains have become leaner as a result of cost cutting exercises. As a result, there is negligible scope of coping up with variations in demand or with unexpected events. The recent crisis over Europe because of the volcano eruption in Iceland demonstrated this at a global level. Companies need improved visibility in their supply chains in future which calls for development of a “collaborative sourcing” approach and establishment of an infrastructure allowing the exchange of information across the supply chain ecosystem.

As an enterprise evaluates different options, Total Cost of Ownership (TCO) is an important parameter. Many customers have become interested in how Cloud Computing or Software-as-a-Service (SaaS) can help lower their costs by eliminating upfront capital investments, very unpopular these days and ongoing maintenance costs associated with on-premise solutions.

Today, organizations need solutions that enable them to meet their business goals and also help them to conserve capital and reduce ongoing costs. For many customers, cloud computing business solutions can help organizations to achieve these requirements and provide them added flexibility to scale according to business demands.



Cloud computing essentially eliminates the need for customers to buy, deploy and maintain IT infrastructure or application software individually. Regardless of the application, the cloud computing vendor takes responsibility for all of the infrastructure required to run the solution-servers, backup, software, operating systems, databases, updates, migration, power and cooling, facility space, etc., as well as associated internal and third-party staffing costs. Since cloud computing vendors manage all of their customers on a single instance of the software, they can amortize costs over thousands of customers. This yields substantial economies of scale and lowers the TCO.

With cloud computing, organizations can monitor current needs and make on-the-fly adjustments to increase or decrease requirements and capacity and accommodate spikes in demand without paying for unused capacity during slower times. Aside from the potential to lower costs, organizations gain the flexibility of being able to respond quickly to requests for new services and requirements by purchasing them from the cloud.

Problem Statement

This whitepaper is written with an intention to promote a supply chain business solution for several organizations, especially Retail and CPG, which are facing challenges in terms of buying, deploying and maintaining IT infrastructure or application software. An attempt has been made to identify certain business-related and technological challenges in the subsequent paragraphs.

1. Key Business Challenges

The following report from an Aberdeen survey highlights some of the key challenges from the business angle that companies, especially Retail and CPG, today are facing:

Cost to purchase and deploy traditional on-premise SCM solutions

22%

19%

16%

16%

15%

13%

0% 10% 20% 30%

Increased supply chain complexity

Speed of change in supply design requirements and network

rising customer collaboration requirements

rising customer service requirements

% of respondents

rise in length of IT backlog and time to implement new solutions



TCO: Cost to purchasing, deploying and running traditional on-premise SCM solutions

Empowered consumer: Hyper connected consumer and

rising customer service requirements

Reverse Logistics Management:

a) Improper return management

b) Improper warranty management

MIS & KPI Analytics

Complexity: Increased supply chain complexity:

a) Speed of change in supply chain

b) Advent of Multi-channel Demand Fulfillment

c) Rise in length of IT backlog and time to implement new solutions

d) Globalization

Traditionally, enterprises deploy solutions on their own servers, own the software and bear the cost of hardware, licenses, infrastructure and deployment. Deploying traditional SCM solution requires huge capital investments.

Customers keep raising the bar of their expectations as consumers grow richer, are better informed and travel more.

Faced with the pressure to raise the customer service standard of excellence, businesses are not able to meet the demands.

Inadequate returns management drives the management to over invest capital in their business; they try to balance the risk of inadequate returns with the cost of holding capital. Increased warranty costs and customer dissatisfaction can result from improper warranty servicing.

Due to many disjointed and disconnected systems, there is a challenge to get the single version of truth across supply chain. Also, due to large data volumes, it is difficult to get useful information.

Understanding and managing the drivers of supply chain complexity is important for an organization to progress towards cost effective and optimized solutions.

Today’s rapidly changing economy - rapid price fluctuations, surging oil prices, global competitions and supply chain -- creates a stress on an enterprise to respond quickly and effectively.

Currently, many organizations still have a single channel of fulfillment and are hesitant to move towards multiple channels such as eCommerce. At the same time, the consumers are demanding flexibility of multi-channel fulfillment.

There is no SaaS-based solution which is end-to-end; there are piece-meal solutions such as standalone TMS solution, WMS and time to implement each solution and the interfacing between the same is significantly high.

In the current scenario, supply chain has expanded its scope from local to global. A typical retailer sources its goods across the world and hence transforms itself into a multi-country entity.

Business Challenges Description



2. Key Technical Challenges

System Uptime

Lack of technical support and people dependency

Coping up with system upgrades

Integrated solution

Lower ROI and longer lead time to implement

It is imperative for the proposed solution to have and sustain industry standard uptimes, as this will be a multi-tenant solution. Important challenges for system uptime are:- Planning and scheduling downtime- Reliability centered maintenance- Productivity maintenance

Organizations do not have sufficient product and technical knowledge, have high support needs and bear upgrade costs.

Whenever a product’s newer version enters the market and it is understood to suit the requirements better, huge cost and time is involved in product upgrade.

If multiple applications are implemented as a solution, the integration between the same involves high service cost, integration difficulty and technical requirements.

Typically on premise SCM implementation have longer lead time and the ROI of implementation is only observed after 3+ years.

Technical Challenges Description

Key Industry Trends

Retail and CPG companies, being leaders in outsourcing and new technology adoption, are still limited to manpower and project outsourcing. With the cloud-based service, Retail and CPG companies can leverage the complete outsourcing IT service and hardware infrastructure.

Cloud computing presents organizations with a different model of operation that takes advantage of the maturity of web applications and networks. Cloud providers specialize in particular applications and services and this expertise allows them to efficiently manage maintenance, backups, disaster recovery, upgrades, migrations and failover functions. As a result, consumers of cloud services may see increased reliability, even as costs decline due to economies of scale and other production factors. The key trends witnessed in the industry today are:

1. Platform consolidation, rationalization and virtualization

Many retailers are looking at massive consolidation and transformation of aging applications and antiquated platforms in order to realize the benefits of both



private virtualization and cloud, while reducing infrastructure costs from the data center to the desktop. More generally, if retailers want to continue to innovate their systems, they cannot afford to ignore cloud computing.

2. Data centricity

Many of today’s applications operate within silos (e.g. product, departmental) with “hard-coded” business functions that are antiquated and narrowly focused. Building or upgrading enterprise data centers and building new data centric applications across the business, are massive undertakings. Cloud Solutions can offset costs and speed up implementation.

Most of the Global 2000 have more than four or five data centers. This results in huge labor, cost, time, effort and money, in addition to resulting in global warming. Retail and CPG companies, rather than operating more data centers, can look at the possibility of leveraging cloud services to minimize the cost of running the data center. Companies with large batch-oriented tasks can get their results as quickly as their programs can scale. The economies of scale of a very large-scale data center combined with ‘pay-as-you-go’ resource usage have praised the rise of cloud computing.

3. Effectiveness at customer touch points

Customers are choosing to engage with retailers through multiple channels to become “omni-channel”.

Driven by convenience, location, ease-of-use and availability of technology, today’s hyper connected and demanding customers are creating new engagement models and are driving retailers to adopt more innovative solutions quickly and cost effectively.

To support and enable this change, many emerging solutions in this space are cloud-based — leveraging capabilities and infrastructure that are not installed within a retailer’s data center. Whether it’s social media platforms, eCommerce engines, search optimization services or mobile computing solutions, these capabilities all exist “in the cloud” and can enable a retailer to engage with its customers in unique and novel ways without the level of capital investment typically required to build and support a new channel.

4. Global expansion

As leading retailers become multi-national organizations, they need to scale up the technology infrastructure to support their new global operations. Cloud can substantially impact the related costs and speed to deliver. Cloud is the most innovative and cost effective way to have and maintain a global footprint.

5. Business analytics

Retailers will need to perform massive computing for periodic demands for analytic processing power and the traditional spikes in seasonal consumer



demand. As analytic business processes become available as a cloud service, retailers will benefit from inventory predictions and demand business forecast capabilities.

6. Enterprise risk management

Retailers are and will always adopt significant upgrades to their enterprise risk capabilities - in particular the ones which manage data like real-time information hubs, complex event processing, business warehouse analysis and more, which can be suitably offered on cloud services.

Solution

An ideal solution is to provide a secured and managed environment that the customers (or groups of customers) can use to perform specific functions. A solution needs to have an option to increase and/or decrease computing capacity in function of the needs at any given moment in time and charge customers on a pay-per-use basis. This is ideal to build a ‘Supply Chain Cloud’, on which the customers of a specific ecosystem can securely perform transactions, exchange information and analyze for trends, reports etc, without adding to the TCO.

Supply Chain as a Service - SCAS

A Best of Breed (BoB) standalone solution can be identified in each area to meet the complete end-to-end requirements in supply chain: eCommerce (Order Capture), Customer Order Management, Customer Relationship Management (CRM), Warehouse Management System (WMS), Transportation Management System (TMS), along with Business Analytics capabilities – all integrated and placed on supply chain cloud.

Enterprises Channels

Sourcing & Procurement

TMS Planning

Logistic 3PL

APPLICATION / WEB LAYER

BUSINESS LAYER

Value added Servicesreturns

Desktops

WMS/TMS

Storage

OMS, Order Capture

Servers

analytics

analytics

Service Providers

SCM Cloud

Infrastructure Cloud

BPO/KPO ServicesSecurity Layer



Some of the potential BoB solutions for supporting warehouse management activities, Order Management, Google maps and the respective APIs for geocoding and providing the solutions for transport management can be hosted on cloud and the same instance can be used for multiple vendors on a transaction-based model.

Retail and CPG in today’s environment generally do not want all the solutions and functionality within each solution for their business; they do not want to spend huge chunks of money for the implementation of BoB solutions.

It would be highly attractive for such enterprises to access only the services required by them from cloud on “as and when” basis.

HCL has conceptualized this solution and has named it SCAS – Supply Chain as Service -- and patented it in India.

Service Offerings

Apart from the solution on cloud, there can be more service offerings like Process Consulting, Support and Supply Chain KPO, as there would be domain and technical consultants available to support the enterprises whenever the business needs them.

Unique Business Benefits

Supply chain on cloud is an attempt to build on the customer’s business strategy and help them gain competitive advantage by leveraging IT to drive increased value across the value chain.

1. BoB Scalable & Reliable Solution

• BoB solution under one umbrella:

Different areas of supply chain would be catered by BoB solutions under one cloud and business would be able to access the benefits of each solution, almost with negligible cost as compared to implementing all

HCL (SCAS) - Business Layer

Services

Service Billing

Vendor Order

Management

Customer Order

Management

Order Management Logistics Management

Return Management & Warranty

Management

CFS / ICD ManagementTMSWMS

Supply chain visibility - Dashboard

HCL integration layer / Infrastructure



solutions on his own hardware. Small to medium sized enterprises would be able to afford the same rich and sophisticated solutions as the multi-billion dollar enterprises.

• Solutions scalable as per the need of business:

The solutions implemented would be flexible to accommodate new expansions/ business in a very short span of time.

2. Reduce CAPEX, TCO

• Reduce initial investment and TCO:

There would be no capital investment in hardware, no software license investment and no infrastructure foot-print, which would bring down the initial investment cost to almost 25% of TCO.

• Translate user subscription to licensing cost:

Monthly subscription fees replace perpetual fully paid licenses, allowing organizations to recapture solution costs through efficiency savings and other benefits as they go.

• IT Hardware Maintenance, Customer Support Center and Human Capital Management are non-core areas of a Retail & CPG company. Our solution will help you to focus on our core business areas and SCAS takes care of all other IT, BPO and hardware-related activities.

3. Role-based Access

• Granular administration of user and group privileges is very important for internal security and the accounts can be customized to display specific types of data

4. Seamless Integration

• Ensure seamless integration with customers IT ecosystem:

Everything is subject to change. Seamless integration means making a change without error or interruption in service. The enterprise can now benefit from seamless integration of SCM services on cloud with customer’s IT ecosystem and a smooth functioning of the overall solution. SCAS is based on the SOA architecture and can be seamlessly integrated with any standard industry solution or product.

5. Subscription Catalog

• Catalog with SCM functionalities for a user to choose from:

This provides greater and direct visibility to enterprises on communications, solutions and services offered by SCM on cloud. This would make it very easy to look and identify different areas to begin to quantify the benefits of different solution components which will best serve an enterprise.



Conclusion

The demand for supply chain solutions is growing with consumerism leading to huge capital and manpower crunch. Current and future supply chain problems can be effectively solved by on-demand hosted supply chain software delivery model designed and delivered on Software-as-a-Service (SaaS).

The potential of this technology lies in overcoming the monolithic nature of traditional ERP systems in operation and scale. Cloud-based models provide a prospective customer the ability to capture and deliver orders through a globally visible network and to ship the product directly to the consumer or retailer.

As analysts iterate that emerging supply chain systems are evaluated basis its adaptability to innovative platforms vis-à-vis cost effectiveness, a cloud computing solution with particular emphasis on global supply chain as an enabler to bottom the cost-of ownership model would compel any smart organization to leapfrog in their industry using the economic benefits derived from shifting to cloud as their IT model.

For more information, please write to [email protected]



About The Author Sekhar Babu Head of Retail Transformation Services

Sekhar has around 16 years of experience in the IT industry and holds a Bachelors degree in Computers. Currently, he heads the HCL Retail Transformation Service group which is responsible for creating new solutions in this space. He is one of the thought leaders in the company and invests in creating competency around the cutting edge technology. He actively participates in forums and discussions with analysts and CIOs.

Nipun Kohli Practice Manager

Nipun Kohli has over 10 years of leadership experience with Fortune 100 companies in the Retail, Multi-channel and Logistics and Supply Chain Execution area. Nipun is a seasoned speaker and a number of his papers have been published in Indian and international forums. Nipun also holds the program chain for CSCMP (Council of Supply Chain Management Professional, North India Chapter). Nipun holds an Engineering degree and Management Diploma from IIM Bangalore.

Sandeep Rameja Associate Business Manager

Sandeep Rameja has about 6 years of extensive industry experience in Business Analysis, IT Consultancy and Quality Assurance with leading global organizations in Retail, Logistics and Supply Chain Execution area. Sandeep has worked on multiple supply chain product implementations in US & Asia Pacific and shares an extensive interest in the supply chain domain. Sandeep holds an Engineering degree in Computer Science and an MBA in IT.

Gaurav Dixit Senior Business Analyst

Gaurav is a multi-channel evangelist and practitioner with more than 6 years of experience working with Fortune 100 companies in the Multi-channel, Finance and Analytics domain. His passion lies in providing “Real Business Value” to customers. Gaurav is an MBA-Gold Medalist from SP Jain Center of Management and holds an engineering degree.

Nikhar Agarwal Associate Consultant

Nikhar is a Supply Chain Consultant with over two years of experience with Fortune 500 companies in the Retail and Supply Chain Execution area with a focus on business consulting.

© 2011, HCL Technologies. Reproduction Prohibited. This document is protected under Copyright by the Author, all rights reserved.

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ABOUT HCL

About HCL Technologies

HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on ‘transformational outsourcing’, underlined by innovation and value creation, and offers an integrated portfolio of services including software led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 26 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare. HCL takes pride in its philosophy of ‘Employees First’ which empowers our 80,520 transformers to create real value for customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 3.7 billion (Rs. 16,977 crores), as on 30th September (on LTM basis). For more information, please visit www.hcltech.com

About HCL Enterprise

HCL is a $6 billion leading global technology and IT enterprise comprising two companies listed in India - HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India’s original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of 88,000 professionals of diverse nationalities, who operate from 31 countries including over 500 points of presence in India. HCL has partnerships with several leading Global 1000 firms, including leading IT and technology firms. For more information, please visit www.hcl.com

HCLT Whitepaper: Supply Chain as Service

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